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A long-term significant bottom is forming in the solar sector, presenting a great investment opportunity on the long side.

Price Action Over the Prior Week(s).

Solar stocks in general have been in a downward plunge since 2015, with even sharper extension since early 2016. But in the last few weeks we have seen some noticeably sharper drops in the likes of First Solar (NASDAQ:FSLR), SunPower (NASDAQ:SPWR) and others. SPWR got hit with a 33% drop as investors did not react well to a recent earnings report lowering guidance. This fear infected many stocks, including FSLR, which saw roughly a 25% fade in August.

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Anecdotal and Other Sentiment Indications.

Elliott Wave Theory teaches us to look for patterns in investor sentiment that manifest themselves in price action. This form of analysis gives us high probability indications that sentiment is near extreme levels of fear or greed. At times, it causes us to be somewhat contrarian to other analysts. I think the "infection" from SPWR that spread so easily to FSLR and put pressure on the Guggenheim Solar ETF (NYSEARCA:TAN)and other solar stocks says a great deal about sentiment. Investor fear is at an extreme and the stocks are due for a turn.

The final move in a correction is often punctuated by extreme pessimism, which is evidenced by the presentation of news and analysis. Even financial or political events that would be seen as bullish against another background will now be looked at in a negative light. Recently, we experienced a slew of downgrades within the sector on August 10th. Subsequently, we saw headlines like: "ETF's with exposure to SunPower Corp" and "Are Solar Developers in Trouble?" Then, a class action lawsuit was filed against SPWR. Heck, even the Audubon Society has turned against solar! One might have thought that a group dedicated to nature and wildlife would be a strong supporter of clean green energy. But bird lovers are suddenly not fans of solar farms. Now that sentiment is so negative, the public is finding reasons to dislike solar, as evidenced by recent articles on that topic. For instance, Garry George, renewable energy project director for...